AWM landscape in China - A golden era awaits foreign asset and wealth managers

May 2021

Since its inception just over two decades ago, the Asset & Wealth Management (AWM) industry in China has grown to extraordinary heights, along with the country’s overall economic rise. However, the industry at large is still far from reaching its full potential and pockets of the industry are still in its embryonic stages of development and ripe with growth opportunities. In recent years, the AWM industry in China has experienced an increase in interest and activity, inbound and outbound, as policymakers continue to embark on its programme of capital liberalisation and structural reforms. This partly reflects China’s swelling desire to enhance its financial markets infrastructure, so it can support the country’s unrelenting economy growth and global ambitions, which will ultimately require investment from domestic and foreign sources. As part of this, foreign asset and wealth managers through various avenues can now realise significant opportunities from; investing in China’s onshore markets, operating in China, and raising capital from Chinese investors for investing offshore.

To date, it can be observed that foreign asset and wealth managers have been on the periphery, as the AWM ecosystem in China has largely been dominated by domestic institutions. All this is changing though, as policymakers strive to increase the involvement of foreign players, who have the potential to fill the apparent ‘capabilities gap’ and offer the necessary experience, ability and product suite to cater to Chinese investors. Foreign players new and old, small and large, must be ready to seize the opportunity when it arrives, and this includes those looking to plant flags or deepen their existing presence in the country. Opportunities are aplenty, and with the pie expanding, even a small slice can be significant. To succeed in the market, one must recognise China is unique in contrast to other markets, and foreign players should be mindful that they cannot simply ‘import’ their tried and tested strategy used in other places.